INVESTMENT GUIDE. Investing for your future

Transcription

1 INVESTMENT GUIDE Investing for your future March 2019

2 Contents Page Define what type of investor you are 4 Look at your investment options 10 Useful things you should know 27 Making your investment choice 34 2

3 Everything we do at AustralianSuper is designed to help everyday Australians achieve their best retirement. As the largest super fund in the country and one of the biggest funds in the world, our size and scale mean you have access to some of the world s best investments. Choosing how to invest your super is a big decision. This guide can help make it an easier one. You ll look at your investment needs and then go through your options in more detail. 3

4 Define what type of investor you are Here you ll start to find out what type of investor you are and build an understanding about: how long you re investing for the types and levels of investment risk and how you feel about them how hands-on you want to be with your investments how to minimise risk. 4

5 What type of investor are you? There are many different ways to invest money, which suit different people according to age, situation and personality. Use this section to work out what type of investor you are how you feel about investment risk, what your investment timeframe is and how involved you want to be in managing your super. How long you re investing for Your investment timeframe is how long you plan to invest your super savings before you retire, as well as how long you want your savings to last once you do retire. Take a look at the table alongside to see how long you might need to keep your savings invested in super based on how old you are now and your current life expectancy. Keep in mind the timeframes shown are averages so you may well live beyond these ages. Investment risks and how you feel about them All investments have risks, so it s important to understand how you feel about risk. This will help you in your investment option selection. You ll also need to weigh this up with your investment timeframe and your retirement goals, including how you want to use your money when you retire. Investment timeframe Current age Male Female years 65 years years 55 years years 45 years years 36 years years 27 years years 22 years Source: Australian Bureau of Statistics, Life tables, States, Territories and Australia October Only 10% of Australians feel very well prepared for retirement Many people retire earlier than they think. 50% Earlier than planned 40% At the age expected 10% Later than planned Source: Investment Trends October 2017 Retirement Income Report. 5

6 Different types of investments perform differently over time If 20 years ago you put $10,000 into different types of investments (we call these asset classes), your money would have grown in each asset class some much more than others. What s also interesting to see are the different ways they grew. The amounts shown are calculated to 30 June Short-term risks are different to long-term risks In the short term, the key risk is investment market volatility and the risk your super savings will be reduced by the market s ups and downs. The long-term key risk is inflation and the risk that your super savings won t grow to meet it. $ Australian shares International shares 70,000 Direct property Bonds $64,962 Cash 60,000 50,000 $54,572 40,000 30,000 $34,079 $24,126 20,000 $23,520 10, Notice Cash was steady over the 20 years the downside is that it grew less than the more volatile assets like shares over the long term, which may mean it didn t keep up with rising costs of daily living. Take a look at Australian shares they had some of the strongest growth over time but if you just focused on one year such as 2009, they had a terrible year with more fluctuations. The information in this graph has been prepared using data from the following market indices: Australian shares S&P/ASX 300 (All Ordinaries before 1/4/2000); International shares - MSCI All Countries World ex Australia NET WHT (Unhedged) in AUD; Direct property Mercer/IPD Australia Unlisted Wholesale Property Fund Index; Bonds 50% Bloomberg Ausbond Composite (0+Y) + 50% Citigroup World Government Bond Index (Hedged) in AUD. Cash Bloomberg AusBond Bank Bill Index. Investment returns are not guaranteed. Past performance is not a reliable indicator of future performance. Volatility and inflation are two of the key risks that can impact your investments. It s important to know about other risks which can also affect your super in different ways, including interest rate movements or changes to super rules and regulations. For more information about types of risk, visit australiansuper.com/risktypes 6

7 The risk of inflation over the long term Inflation reduces the value of money over time. This means the money you have saved now will be worth less in the future. Inflation is something you need to think about when choosing your investment options, particularly if you ve got a long-term investment timeframe. 30 years from now, you may need more than double the money to buy what you can today Loaf of bread $3.00 Takeaway coffee Bottle of milk $4.00 $1.50 Daily fare on public transport $ Loaf of bread Takeaway coffee Bottle of milk Daily fare on public transport $6.30 $8.40 $3.15 $16.80 The above examples assume an annual inflation rate of 2.5% each year. 7

8 Decide how hands-on you want to be with your investments Choosing the right investment is important. It can affect how much your savings grow and how long they last. You can decide to either leave your investment choice to us or choose and manage your own. Listed below are three options you can choose from. Otherwise, if you d prefer us to choose for you, your super savings will go into our Balanced investment option. Option 1: PreMixed Option 2: DIY Mix Option 3: Member Direct Hands-on level: Low Hands-on level: Hands-on level: High PreMixed options are diversified options that invest across different combinations of asset classes such as shares, property, infrastructure, fixed interest and cash. Your PreMixed choices are: High Growth Balanced (default investment option) Socially Aware Indexed Diversified Conservative Balanced Stable. DIY Mix options are single asset class portfolios. You choose how much you want to invest in each in a mix that can also include one or more PreMixed options. Your DIY Mix choices are: Australian Shares International Shares Property Diversified Fixed Interest Cash. The Member Direct investment option gives you the greatest control of all options. You invest your own super in a range of listed securities, including: Shares in the S&P/ASX 300 Index Exchange Traded Funds (ETFs) Term deposits. If you re a super member with us, you ll need $10,000 or more in your account to invest in Member Direct. If you re a retirement income member, it s $50,000. If you re setting up a Choice Income account, you can set up with Smart Default which offers pre-selected investment and payment options. Find out more at australiansuper.com/smartdefault 8

9 How to minimise risk So far, we ve focused on helping you work out what type of investor you are, how comfortable you are with investment risks and the amount of control you want. Here are a few other things to consider when making your investment choice, as well as some ways to help manage your investment strategy and minimise risk. Mixing it up can help Investing in a mix of investments (diversification) can help protect your investments against market ups and downs. Spreading your investments across a variety of companies, industries and regions in different asset classes can help reduce the risk of negative returns. Diversification is particularly important to consider if you re planning to build your own strategy with our DIY Mix options or invest your own super using Member Direct. Our PreMixed options are already diversified and each option has a different mix of assets. Focus on your long-term needs Watching your super balance go up and down can be unsettling. While it can be tempting to change investment options when markets are down, it isn t always the best approach. Investments that are volatile over short periods of time usually grow more over longer periods. It s normal for markets to change Most investments go up and down over time. Market movements can mean the asset allocation of your portfolio moves away from its original strategy and changes your risk level. In our PreMixed options, we actively adjust the asset allocation so it reflects our strategy. If you invest in our DIY Mix options or Member Direct, you ll have to manage this yourself. Review your strategy When your circumstances or objectives change, it s a good idea to review your strategy to ensure it s still right for you. For example, you might be nearing retirement and need to access some of your super in the short term. Consider seeking financial advice The best option is the one that suits your investment timeframe, circumstances and goals. A professional financial adviser can help you develop an investment strategy to meet your needs, which could make a big difference to your retirement savings over the long term. To find out more about your advice options and how to get the help you need, see page 35. 9

10 Look at your investment options In this section you ll find details about your investment options, including the investment aims, asset allocations and risk levels for each one. If you invest in our PreMixed options, we manage things for you. You can build your own mix of investment types by investing in our DIY Mix options. We also offer Member Direct which allows you more control over how your super savings are invested. 10

11 Risk levels of investment options When choosing your investment options, the risks you need to consider will be different depending on how long you plan to invest for. Short-term -term Long-term Our investment options are split into short, medium and long-term risk levels. If you plan to invest for under 5 years Investments may be reduced by market volatility and not have time to recover. If you plan to invest for 5 20 years Investments may be reduced by market volatility and/or your savings might not keep up with inflation. If you plan to invest for over 20 years Your savings may not keep up with inflation. The way we work out the risk levels for each option is different depending on whether it s for the short, medium or long-term. The short-term risk level is the same as the Standard Risk Measure, which is used across the super industry to help members compare the risk levels of investment options. The short-term risk level classifies investment options according to their likelihood of negative returns in a given year. The medium-term risk level is a combination of the short-term and long-term risk levels. The long-term risk levels are calculated by estimating how likely it is that the investments within each option will perform worse than inflation. Read more about how we calculate risk levels at australiansuper.com/risklevels 11

12 Risks and your investment timeframe The scenarios below highlight just some of the things you could consider when looking at options for investment timeframes. You ve already retired or are planning to soon and you want to use your savings in the next few years. Short-term (under 5 years) You may be more concerned with protecting your existing savings than taking chances to grow them. Consider an option with a lower risk level in the short term like Cash. You want your super savings to last as long as possible in your retirement. -term (5-20 years) Getting the balance right is the key: you may want to invest some money in lower-risk options, but you may need to look at how aggressively you invest the rest so your savings grow faster than inflation. Retirement isn t really on your horizon yet, so growing your savings and maximising your returns is your priority. Long-term (over 20 years) For strong returns over the long term, consider a more aggressive strategy. Look at options that have a higher short-term risk level but a lower risk level over the long term like our Balanced, High Growth, Australian Shares or International Shares options. 12

13 Asset classes Asset classes are the building blocks of your investment. Some investment options invest in one asset class, while others include a mix. We invest in the following asset classes: Cash Money market securities such as deposits, bank bills and short-term bonds that are issued by banks, the Australian Government and some companies. Credit Debt securities, leases, royalties, hybrids and loans issued by both investment grade and high yield companies and other financial entities, such as, government agencies, special purpose vehicles (SPV) and emerging market governments. Returns are mainly driven by the credit quality of the underlying issuer of the debt. Credit is a subset of the fixed income asset class and in our portfolios is managed separately from the sovereign investment grade bonds. Fixed interest Loans, bonds and securitised debt issued by governments, private companies and banks that pay regular interest income over a set term. The principal amount lent is repaid when the security matures. These securities in the fixed income portfolio are generally investment grade quality, although we may invest a portion of the portfolio in higher yielding debt. Interest rate risk is viewed as the most significant risk for this asset class. Private equity Investment in companies that aren t listed on a stock exchange. Can include Australian and international companies across a wide range of industries. Other assets From time to time, we may invest in other assets which represent a short or medium-term opportunity based on them being attractively priced. These include but are not limited to assets such as commodities, royalties or leases. Shares (stocks, securities, equities) Part of a company that you can buy and sell on a stock exchange. You can access large and small companies across a range of industries in Australia and overseas. Direct Property Direct holdings in residential, retail, industrial or commercial real estate. Listed Property Is a closed-end investment company that owns assets related to real estate such as buildings, land and real estate securities. They are listed on stock market exchanges and can be traded like common shares. Infrastructure Assets that provide essential public facilities and services such as roads, airports, seaports and power supply and generation in Australia and overseas. 13

14 A snapshot of your investment options Here s a high level overview of your investment options, including a brief description, their risk levels over different investment time periods and where you can find more detail on the pages following. PreMixed Risk profile Description Short-term -term Long-term See page High Growth Invests in a wide range of assets with a focus on Australian and international shares. High Low to medium 18 Risk levels of investment options Balanced Invests in a wide range of assets such as Australian and International shares, Infrastructure and Direct Property. High Low to medium 18 Short-term Under 5 years -term 5 20 years Long-term Over 20 years Socially Aware Indexed Diversified Selects shares and fixed interest investments using strict screening based on environmental, social and governance standards as well as investing in a wide range of other asset classes. Invests in a wide range of assets using indexing strategies. High High to high 18 Low to medium 19 Conservative Balanced Includes a higher allocation to fixed interest and cash than the Balanced option. High Low to medium 19 Stable An emphasis on fixed interest and cash with a higher focus on stability than growth. to high 19 For our PreMixed options, we work out what the different mix of asset classes will be for each option. The asset allocation ranges are the minimum and maximum amounts we can invest in each asset class. Each year we set a percentage we might invest in each asset class as a guide this is called the strategic asset allocation. During the year we can move towards or away from this percentage based on our outlook for the economy and investment markets. 14

15 When looking at the snapshots on these pages, think about: 1. how long you plan to invest for (under 5 years? 5 20 years? or over 20 years?) 2. the overall risks of that investment timeframe 3. what level of risk you re comfortable taking with your investments. DIY Mix Description Risk profile Short-term -term Long-term See page Australian Shares Invests in a wide range of companies listed on the Australian Securities Exchange. Very high to high 21 Risk levels of investment options International Shares Invests in a wide range of companies listed on securities exchanges around the world. Very high to high Low to medium 21 Short-term Under 5 years -term 5 20 years Long-term Over 20 years Property Diversified Fixed Interest Cash Invests in Australian and overseas properties, including shopping centres and office buildings. Invests in a wide range of Australian and international bonds and loans. Invests in short-term money market securities and some short-term bonds. to high Very low to high to high to high 21 High 22 Very high 22 Member Direct Self-managed option You choose and manage your own investments. You can invest in a range of listed securities, including stocks in the S&P/ASX 300 index, exchange traded funds (ETFs) term deposits and cash. 24 Risk levels for the time invested Shares and ETFs* Term deposits Cash Short-term (< 5 years) -term (5 to 20 years) Long-term (> 20 years) Very high Very low Very low to high to high to high Very high Very high Expected frequency of negative annual return About 6 in every 20 years Not expected Not expected * Risk measures are based on investment portfolios with broad market exposure to Australian shares, they may differ for the individual investments you choose and your investment time frame. Risk for concentrated portfolios could be very high. The time frame recommended for holding a broad portfolio of shares and ETFs is at least 12 years. Whilst cash and term deposits are not expected to have negative returns, investments remain exposed to the creditworthiness of the issuer. 15

16 Understanding your investment options On the next few pages you ll find more detail about each investment option. To help you understand what makes up each investment option, we ve put together the example below. If you can t keep your money invested for at least this long, this option probably isn t for you. How often this option is likely to go backwards in a 20-year period. Balanced Invests in a wide range of assets. Designed to have medium to long-term growth with possible short-term fluctuations. Investment aims To beat CPI by more than 4% pa over the medium to longer term. To beat the median balanced fund over the medium to longer term. Minimum investment timeframe: At least 10 years. Risk level for the time invested term Short-term Long-term High Risk of negative return: About 5 in every 20 years. Low to medium A short summary about what the option s invested in and what it was designed to achieve. The goals set up for each option, often comparing their performance to the CPI (Consumer Price index), which is the official measure of inflation. The risk profile of each option will vary depending on how long your money will stay in it. See page 14 for more. The chart shows the combination of asset classes that typically make up each option. Australian shares 22% (10 45%) International shares 34% (10 45%) Direct property 7% (0 30%) Infrastructure 12% (0 30%) Private equity 4% (0 10%) Credit 2% (0 20%) Fixed interest 11% (0 25%) Cash 8% (0 20%) Other assets 0% (0 5%) The percentages for each asset class are the strategic asset allocations with the range shown in brackets. Check out how our investment options have done against industry and market benchmarks. See page 28 for our past performance to 30 June

17 Your PreMixed investment options Choose the mix that best suits you and leave the rest to us. With our PreMixed options, we ve done the diversification for you. These options are made up of more than one asset class and with different levels of risk and expected return. 17

18 PreMixed investment options High Growth Balanced Socially Aware* Invests in a wide range of assets with a focus on Australian and international shares. Designed to have strong long-term returns with possible fluctuations in the short-term. Investment aims To beat CPI by more than 4.5% pa over the medium to longer term. To beat the median growth fund over the medium to longer term. Invests in a wide range of assets. Designed to have medium to long-term growth with possible short-term fluctuations. Investment aims To beat CPI by more than 4% pa over the medium to longer term. To beat the median balanced fund over the medium to longer term. Selects shares and fixed interest investments using strict screening based on environmental, social and governance standards, as well as investing in a wide range of other asset classes. Designed to have medium to long-term growth with possible short-term fluctuations. Investment aims To beat CPI by more than 4% pa over the medium to longer term. To beat the median balanced fund over the medium to longer term. High Risk of negative return: About 6 in every 20 years. Low to medium Minimum investment timeframe: At least 10 years. Risk level for the time invested term Short-term Long-term Minimum investment timeframe: At least 10 years. Risk level for the time invested term Short-term Long-term High Risk of negative return: About 5 in every 20 years. Low to medium Minimum investment timeframe: At least 12 years. Risk level for the time invested term Short-term Long-term High to high Risk of negative return: About 5 in every 20 years. Australian shares 28% (20 50%) International shares 44% (20 50%) Direct property 6% (0 30%) Infrastructure 10% (0 30%) Private equity 5% (0 10%) Credit 2% (0 20%) Fixed interest 2% (0 20%) Cash 3% (0 15%) Other assets 0% (0 5%) Australian shares 22% (10 45%) International shares 34% (10 45%) Direct property 7% (0 30%) Infrastructure 12% (0 30%) Private equity 4% (0 10%) Credit 2% (0 20%) Fixed interest 11% (0 25%) Cash 8% (0 20%) Other assets 0% (0 5%) Australian shares 22% (10 45%) International shares 34% (10 45%) Direct property 7% (0 30%) Infrastructure 12% (0 30%) Private equity 4% (0 10%) Credit 2% (0 20%) Fixed interest 11% (0 25%) Cash 8% (0 20%) 18 * This investment option may use Exchange Traded Index Futures (up to 5% of the total assets) to efficiently manage cash flows and ensure this option is invested within the targeted asset allocation. This may include economic exposure to companies that are normally excluded by the option s investment screens.

19 PreMixed investment options Indexed Diversified Invests in a wide range of assets using indexing strategies. Designed to have medium to long-term growth with possible short-term fluctuations. Conservative Balanced Includes a higher allocation to fixed interest and cash than the Balanced option. Designed to have medium-term growth with a balance between capital stability and capital growth. May also have some short-term fluctuations. Stable An emphasis on fixed interest and cash with a higher focus on stability than growth. Investment aims To achieve an average annual return of CPI + 3% pa over the medium to longer term. High Risk of negative return: About 5 in every 20 years. Low to medium Investment aims To beat CPI by more than 2.5% pa over the medium term. To beat the median conservative balanced fund over the medium term. High Risk of negative return: About 4 in every 20 years. Low to medium Investment aims To beat CPI by more than 1.5% pa over the medium term. To beat the median capital stable fund over the medium term. Minimum investment timeframe: At least 10 years. Risk level for the time invested term Short-term Long-term Minimum investment timeframe: At least 5 years. Risk level for the time invested term Short-term Long-term Minimum investment timeframe: At least 3 years. Risk level for the time invested term Short-term Long-term to high Risk of negative return: About 3 in every 20 years. Australian shares 32% (20 50%) International shares 38% (20 50%) Listed property 0% (0 10%) Fixed interest 17% (0 30%) Cash 13% (0 30%) Australian shares 16% (5 35%) International shares 24% (5 35%) Direct property 5% (0 25%) Infrastructure 9% (0 25%) Private equity 2% (0 5%) Credit 2% (0 25%) Fixed interest 26% (0 40%) Cash 16% (0 30%) Other assets 0% (0 5%) Australian shares 9% (0-20%) International shares 14% (0-20%) Direct property 5% (0-15%) Infrastructure 9% (0 20%) Private equity 0% (0 3%) Credit 2% (0 25%) Fixed interest 31% (0 45%) Cash 30% (0 50%) Other assets 0% (0 5%) Ready to make your choice? The easiest way to make your investment choice is to log into your online account at australiansuper.com/login If you can t make your choice online, call us on Strategic asset allocations and other investment information are current as at the date of publication. The Strategic Asset Allocation, composition of individual asset classes and other investment information may change from time to time. Investment returns are not guaranteed. Updated information can be found at australiansuper.com/assetallocation 19

20 Your DIY Mix investment options Build your own mix of investment types by investing in our DIY Mix options and we ll manage it for you. 20

21 DIY Mix investment options Australian Shares Invests in a wide range of companies listed on the Australian Securities Exchange. Designed to have strong long-term capital growth with possible short-term fluctuations in returns. Investment aims To beat the S&P/ASX 300 Accumulation Index over the medium to long term*. International Shares Invests in a wide range of companies listed on securities exchanges around the world. Designed to have strong long-term capital growth with possible short-term fluctuations in returns. Investment aims To beat the MSCI World All Countries (ex Australia) Unhedged Index over the medium to long term*. Property Invests in Australian and overseas properties, including shopping centres and office buildings. Designed to have strong medium to long-term capital growth with lower volatility than shares. Investment aims To beat CPI by more than 3% pa. To beat a composite of Australian and international Property Indices over the medium term, gross of investment expenses and adjusted for tax. Minimum investment timeframe: At least 12 years. Risk level for the time invested Minimum investment timeframe: At least 12 years. Risk level for the time invested Minimum investment timeframe: At least 5 years. Risk level for the time invested Short-term Long-term Short-term Long-term Short-term term term term Long-term Very high to high Very high to high Low to medium to high to high Risk of negative return: About 6 in every 20 years. Risk of negative return: About 6 in every 20 years. Risk of negative return: About 4 in every 20 years. Australian shares 100% (90 100%) Cash 0% (0 10%) International shares 100% (90 100%) Cash 0% (0 10%) Property 100% (90 100%) Cash 0% (0 10%) Important information about the Property option There is a cap on how much you can invest in the Property option. AustralianSuper has the discretion to freeze switches, contributions and withdrawals into and out of the Property option for up to two years in response to a market stress event. We will notify you as soon as possible after a freeze has been imposed. Please read the Property option additional information at australiansuper.com/propertyinfo for full details about the Property option. * Index level returns, adjusted for implied superannuation tax. From 1 January 2019 the composite consists of MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index (60%), MSCI/AREF UK Quarterly Property Fund Index (20%) hedged to AUD and NCREIF Fund Index Open End Diversified Core Equity (20%) hedged to AUD. 21

22 DIY Mix investment options Diversified Fixed Interest Invests in a wide range of Australian and international bonds and loans. This is done through actively investing in the fixed interest and credit asset class sectors and aims for capital stability and higher returns than cash over the short to medium term. Investment aims To beat CPI by more than 0.5% pa over the short to medium term. Minimum investment timeframe: At least 3 years. Risk level for the time invested Cash Invests in short-term money market securities and some short-term bonds. Designed to have stable returns above the official cash rate. Investment aims To beat the return of the Bloomberg Ausbond Bank Bill Index each year*. To beat the annual rate of inflation, as measured by CPI. Minimum investment timeframe: At least 1 year. Risk level for the time invested Short-term term Long-term to high High Risk of negative return: About 3 in every 20 years. term Short-term Very low to high Risk of negative return: Not expected. Long-term Very high Fixed Interest 100% (50-100%) Cash 100% (100%) Credit 0% (0-25%) Cash 0% (0-30%) Find out more about how we invest Visit australiansuper.com/whatweinvestin for more information about where we invest. *Index level returns, which are only adjusted for implied superannuation tax. Strategic asset allocations and other investment information are current as at the date of publication. The Strategic Asset Allocation, composition of individual asset classes and other investment information may change from time to time. Investment returns are not guaranteed. Updated information can be found at australiansuper.com/assetallocation 22

23 Member Direct Take a hands-on approach to the way your money is invested with Member Direct, our member directed investment option. 23

24 Member Direct The Member Direct investment option offers you more control and choice with the investment of your super or retirement income. You can invest in shares, Exchange Traded Funds (ETFs), term deposits and cash all from an easy-to-use online platform. You also get access to real-time trading, extensive market information, independent research and investment tools to help you make informed investment decisions and manage your portfolio. This option suits members who want to be actively involved in managing their investments. Features include: cash account with competitive interest rate S&P/ASX 300 shares, ETFs, term deposits and cash extensive market information and stock analysis consolidated portfolio reporting low administration and brokerage fees. We may change or add to the selection of investments available through the Member Direct option over time. For the current Investment menu, visit australiansuper.com/memberdirect Important information While managing your own investments increases your control and flexibility, the Member Direct investment option is not for everyone. Superannuation is a long-term investment, so this option is not suitable for members who want to time the markets or make short-term investment decisions. As a direct investor, you need to be aware of the risks and dangers involved, such as: short-term share price volatility the consequences of trading too often too little diversification and investing in response to your emotions. Who can invest? To be eligible to invest in the Member Direct investment option you must be an AustralianSuper member and meet the minimum balance requirements shown below: Account type Super $10,000 Choice Income $50,000 Minimum balance You can only register one account (either super or Choice Income) for the Member Direct investment option at any time. Members using a TTR Income account can only invest with Member Direct in their super account. Other important conditions Once you open a Member Direct account, you must keep some money invested in AustralianSuper s other investment options at all times. The minimum amount required is different for super and Choice Income accounts. Account type Super $5,000 Choice Income Minimum balance $10,000 (or 13 months of income payments, whichever is greater.) Income payments for Choice Income members are deducted from AustralianSuper s other investment options. You must keep enough money in your other investment options to cover 13 months of income payments this is called the Income payment reserve*. We will notify you if your balance is below this reserve. If you have a Member Direct Choice Income account and your total AustralianSuper account balance falls below $30,000, you will need to close your Member Direct account and transfer any remaining funds to your other AustralianSuper investment options. * Your Income payment reserve counts towards your minimum balance invested in other options. So for Choice Income members the minimum balance to be invested in other investment options is $10,000, or your Income payment reserve, whichever is greater. 24

25 How your account works Pre-Mixed Managed for you DIY Managed for you Member Direct Managed by you Member Direct investments Cash Account Term Deposits Shares & ETFs Cash Account Cash Account Cash Account Term Deposits Term Deposits Shares & ETFs To invest you will need to open a cash account, which has a competitive high interest rate. Includes the cash account option plus you can also invest in term deposits. Includes the first two options plus the ability to buy and sell shares and ETFs. Market News, Information & Research All the options include access to market news, information and research. Eligible members can choose to access this information without the need to open a cash account. 25

26 Other conditions There are other conditions you must follow to keep your Member Direct investment option active. These include keeping a minimum amount of money in both your Member Direct transaction account and in our other investment options at all times as well as having limits to how much you can have invested in shares, ETFs or term deposits. For a full list of rules that apply to this investment option, read the Member Direct terms and conditions at australiansuper.com/memberdirect Fees There are fees that apply to the Member Direct investment option, these vary depending on the Member Direct investment type you ve selected. Find out more at australiansuper.com/memberdirectfees Get started 1. Make sure you meet the eligibility criteria (see below) 2. Register for an online account at australiansuper.com 3. Log in to your online account and find the Member Direct tile and click Access 4. Select one of the investment options (Content, Cash account, Term deposits or Shares & ETFs) 5. Transfer the minimum balance required 6. Start investing once the money appears in your cash account (Term deposits or Shares & ETFs) Eligibility criteria: be an AustralianSuper member with $10,000 or more in your super account or $50,000 or more in your Choice Income account have access to the internet and a current address read and accept the terms and conditions. Before you decide You should read the Member Direct investment option guide and the Member Direct terms and conditions before making a decision. You ll find more information at australiansuper.com/memberdirect Member Direct isn t for everyone so double-check it s right for you. You ll be managing your own investments and will need to know a lot about investing and the markets. It s important that you re comfortable doing this. We strongly encourage you to seek advice from a licensed financial adviser before choosing this option. They can help you develop an investment strategy to meet your personal circumstances and needs. To find an Adviser visit australiansuper.com/advice Once you register for the Member Direct option You gain access to its online platform. This is where you invest in shares, ETFs, term deposits and cash. 26

27 Useful things you should know Here you ll find some important information that you should also consider when choosing your investment options. Compare our past performance. Understand the investment fees and costs. Read how we aim to maximise returns and keep costs low. 27

28 Compare our past performance We ve been one of the better performing super funds over the past decade. You can keep an eye on how your investments are going by looking at our past performance. We compare the performance of our investment options against industry and market benchmarks. Our PreMixed options are measured against other super funds in the SuperRatings Fund Crediting Rate Survey as well as the CPI. Our DIY Mix options are either measured against the relevant asset class market index or the CPI. Super investment options performance as at 30 June 2018 This table compares our super investment options against the performance benchmarks noted below. For a performance comparison of our options against their CPI-linked benchmarks visit australiansuper.com/cpiperformance AS = AustralianSuper PreMixed options BM = Benchmark 1 year 3 years (pa) 5 years (pa) 10 years (pa) AS BM AS BM AS BM AS BM High Growth 12.43% 10.56% 9.87% 7.81% 11.67% 9.96% 7.40% 6.65% Balanced 11.08% 9.22% 9.30% 7.29% 10.51% 8.91% 7.31% 6.37% Socially Aware 9.58% 9.22% 8.56% 7.29% 9.99% 8.91% 7.95% 6.37% Indexed Diversified 9.41% 5.58% 6.88% 5.18% 8.01% 5.61% N/A N/A Conservative Balanced 8.15% 6.95% 7.41% 5.60% 8.46% 7.02% 6.64% 5.69% Stable 5.99% 4.65% 6.11% 4.41% 6.74% 5.27% 6.15% 5.09% DIY Mix options The following two tables show how we ve done for both super and retirement income investment options to 30 June You can also view our latest performance figures online: for super australiansuper.com/superperformance for retirement income australiansuper.com/retirementperformance Australian Shares 13.66% 12.98% 10.07% 9.40% 10.74% 10.21% 7.35% 6.39% International Shares 14.28% 13.32% 9.73% 8.61% 13.76% 12.72% 8.25% 7.65% Property 7.45% 10.99% 9.19% 11.23% 8.90% 10.22% 5.02% 6.63% Diversified Fixed Interest 2.18% 2.58% 3.56% 2.18% 4.57% 2.61% 6.29% 2.97% Cash 1.83% 1.51% 1.99% 1.65% 2.19% 1.89% 3.30% 2.86% Consumer Price Index 2.08% 1.68% 1.91% 2.12% AustralianSuper returns are shown net of investment fees and taxes. The one, three, five and ten-year figures are rolling annual returns as at 30 June Returns from equivalent investment options of ARF and STA are used in calculating returns for periods that begin before 1 July For up-to-date investment performance visit australiansuper.com/performance Investment returns aren t guaranteed. Past performance isn t a reliable indicator of future returns. Benchmarks High Growth: SR50 Growth (77 90). Index Balanced: SR50 Balanced (60 76) Index. Socially Aware: SR50 Balanced (60 76) Index. Indexed Diversified: Annual CPI + 3% (Prior to 1 July 2018 it was CPI + 3.5% and prior to 1 July 2015 it was CPI + 4%). Conservative Balanced: SR25 Conservative Balanced (41 59) Index. Stable: SR50 Capital Stable (20 40) Index. Australian Shares: S&P/ASX300 Accumulation Index adjusted for tax. International Shares: MSCI AC World ex Australia (in $A) Index adjusted for tax. Property: Composite of MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index (60%), MSCI/AREF UK Quarterly Property Fund Index (20%) hedged to AUD and NCREIF Fund Index Open End Diversified Core Equity (20%) hedged to AUD, gross of investment expenses and adjusted for tax (prior to 1 January 2019 it was MSCI/ Mercer Core Wholesale Property Index (60%), MSCI/AREF UK Quarterly Property Fund Index (20%) and NCREIF Fund Index - Open End Diversified Core Equity (20%) adjusted for tax). Diversified Fixed Interest: Annual CPI + 0.5%. (Prior to 1 July 2015, it was CPI + 1%). Cash: Bloomberg Ausbond Bank Bill Index adjusted for tax. 28

29 Retirement income investment options performance as at 30 June 2018 Here you can compare our retirement income investment options against the benchmarks noted below the table. You can compare our options performance against their CPI-linked benchmarks at australiansuper.com/retirementcpi AS = AustralianSuper BM = Benchmark PreMixed options 1 year 3 years (pa) 5 years (pa) 10 years (pa) AS BM AS BM AS BM AS BM High Growth 13.50% 11.82% 10.73% 9.37% 12.97% 11.16% 8.43% 7.26% Balanced 12.01% 9.92% 10.04% 7.94% 11.71% 9.75% 8.35% 7.04% Socially Aware 10.53% 9.92% 9.53% 7.94% 11.23% 9.75% 8.82% 7.04% Indexed Diversified 10.80% 5.58% 7.80% 5.18% 9.36% 5.61% N/A N/A Conservative Balanced 9.05% 7.51% 8.29% 6.74% 9.67% 7.95% 7.79% 6.82% Stable 6.62% 5.17% 6.78% 4.87% 7.67% 5.98% 7.08% 5.82% DIY Mix options Australian Shares 14.92% 14.83% 10.95% 10.41% 11.97% 10.76% 8.63% 6.65% International Shares 15.70% 15.01% 10.76% 9.65% 15.39% 14.33% 9.17% 8.66% Property 8.20% 12.59% 10.36% 12.91% 10.10% 11.71% 5.55% 7.67% Diversified Fixed Interest 2.58% 2.58% 4.11% 2.18% 5.19% 2.61% 7.23% 2.97% Cash 2.17% 1.78% 2.35% 1.95% 2.59% 2.23% 3.71% 3.34% Consumer Price Index 2.08% 1.68% 1.91% 2.12% As our retirement income product, Choice Income (formerly AustralianSuper Pension), started on 1 January 2008, past performance isn t available prior to this date. AustralianSuper retirement income returns are shown net of investment fees and taxes. If you are fully retired* investment returns in your Choice Income account are tax exempt. Investment earnings within a transition to retirement arrangement are subject to the same maximum 15% tax rate that applies to super accumulation funds. The one, three, five and ten-year figures are rolling returns as at 30 June For up-to-date investment performance visit australiansuper.com/performance Investment returns aren t guaranteed. Past performance isn t a reliable indicator of future returns. Benchmarks High Growth: SRP50 Growth (77 90). Index Balanced: SRP50 Balanced (60 76) Index. Socially Aware: SRP50 Balanced (60 76) Index. Indexed Diversified: Annual CPI + 3% (Prior to 1 July 2018 it was CPI + 3.5% and prior to 1 July 2015 it was CPI + 4%). Conservative Balanced: SRP25 Conservative Balanced (41 59) Index. Stable: SRP50 Capital Stable (20 40) Index. Australian Shares: S&P/ASX300 Accumulation Index adjusted for tax. International Shares: MSCI AC World ex Australia (in $A) Index adjusted for tax. Property: Composite of MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index (60%), MSCI/AREF UK Quarterly Property Fund Index (20%) hedged to AUD and NCREIF Fund Index Open End Diversified Core Equity (20%) hedged to AUD, gross of investment expenses and adjusted for tax (prior to 1 January 2019 it was MSCI/Mercer Core Wholesale Property Index (60%), MSCI/AREF UK Quarterly Property Fund Index (20%) and NCREIF Fund Index - Open End Diversified Core Equity (20%) adjusted for tax). Diversified Fixed Interest: Annual CPI + 0.5%. (Prior to 1 July 2015, it was CPI + 1%). Cash: Bloomberg Ausbond Bank Bill Index adjusted for tax. You can track the performance of your investments every day We calculate returns for each investment option daily using crediting rates. A crediting rate is the rate of investment return paid to you on your account balance, after fees and tax. They can be positive or negative depending on investment markets. You can find out more at australiansuper.com/factsheets * Fully retired means you ve met a full condition of release under super law. 29

30 Understand the investment fees and costs We re serious about making your money last longer, which is why we keep our fees low. We can keep them low because they re only set to cover the costs of running the fund, not to make a profit for shareholders or pay commissions to agents or advisers. The cost to manage your investments We work hard to keep fees down and our costs low. The overall Investment fee we charge covers the cost to us of managing your money. This fee is made of up three components: Investment management fees - amounts deducted from your investment that relate to core investment management functions, such as audit and administrative costs. Performance related fees - fees we pay to external investment managers for generating positive returns. Transactional and operational costs - a broad category of costs we incur that relate to the buying or selling of underlying investments. Examples of these include brokerage and commission. The overall Investment fee is deducted from before-tax investment returns on 30 June before the returns are applied to your account. This fee may change from year to year. Investment costs for Pre-Mixed and DIY Mix investment options Each PreMixed and DIY Mix option has its own investment costs. There may also be some differences between the costs depending on whether you ve got your super or retirement income with us. See page 31 for these costs. Member Direct fees and costs are different Different fees and costs apply to our Member Direct investment option. You can find out more at australiansuper.com/memberdirectfees Administration fees and other fees and costs There are other fees and costs that may be deducted from your account. An administration fee is charged to cover administration costs. Other fees such as activity fees or advice fees for personal advice may also be charged. You should read all the information about fees and other costs because it s important to understand their impact on your investment. Find out more about fees and costs Visit australiansuper.com/fees for more information on administration fees and other fees and costs. 30

31 Super investment costs Here are the 2017/18 investment costs for our PreMixed and DIY Mix super investment options. Name of Investment options Investment Management fee Performance related fee Transactional and Operational costs High Growth 0.51% 0.07% 0.09% 0.67% Balanced 0.51% 0.07% 0.08% 0.66% Socially Aware 0.54% 0.08% 0.12% 0.74% Conservative Balanced 0.41% 0.04% 0.07% 0.52% Stable 0.34% 0.01% 0.06% 0.41% Indexed Diversified 0.12% 0.00% 0.04% 0.16% Total Australian Shares 0.27% 0.00% 0.07% 0.34% International Shares 0.49% -0.02% 0.09% 0.56% Property 0.63% 0.00% 0.22% 0.85% Diversified Fixed Interest 0.40% 0.01% 0.06% 0.47% Cash 0.05% 0.00% 0.00% 0.05% Retirement income investment costs This table shows the 2017/18 investment costs for each retirement income option. Name of Investment options Investment Management fee Performance related fee Transactional and Operational costs High Growth 0.51% 0.08% 0.09% 0.68% Balanced 0.51% 0.07% 0.08% 0.66% Socially Aware 0.55% 0.08% 0.12% 0.75% Conservative Balanced 0.42% 0.04% 0.06% 0.52% Stable 0.34% 0.01% 0.06% 0.41% Indexed Diversified 0.12% 0.00% 0.04% 0.16% Total Australian Shares 0.27% 0.00% 0.07% 0.34% International Shares 0.48% -0.02% 0.10% 0.56% Property 0.63% 0.00% 0.22% 0.85% Diversified Fixed Interest 0.40% 0.01% 0.06% 0.47% Cash 0.05% 0.00% 0.00% 0.05% For further information about investment fees, visit australiansuper.com/investmentfees 31

32 Maximising returns, keeping costs low This is how we do it. Our long-term vision We work hard to maximise investment returns over the long term, so you can enjoy a better future. As long-term investors, we focus on investing in a mix of quality assets that can grow your savings over time. Our core investment beliefs underpin this vision: 1. We are run only to benefit members 2. We use our scale to reduce costs and better structure investments 3. We actively manage investments where it can add value 4. We re aware of our responsibility to the broader community, consistent with our obligations to maximise benefits to members. Investment approach We believe an active management approach is the best way to invest. That s why we select specific sectors, assets and stocks that we believe will outperform the broader market. This is supported by quality research, experienced investment specialists and a disciplined investment process. We also use index managers in some options to lower overall portfolio costs or where active management opportunities are smaller. We manage a range of asset classes internally and our goal is to do more of this over time. This strategy aims to deliver significant cost savings, which go back to you in the form of better net returns. Our investment people We have a range of people and teams involved at different stages of the process. Our investment governance framework ensures the appropriate checks are in place when making and implementing investment decisions, and there are clear lines of responsibility and accountability. The Investment Committee is accountable to the Board for our investment policy and strategy. They oversee investment decisions and review asset allocation recommendations put forward by the internal team. The internal team advises the Investment Committee on all investment matters. The team is responsible for research and portfolio management, monitoring investment managers, managing and implementing our asset allocation process and work with our external asset consultants. A mix of internal and external investment managers select and manage the investments within each asset class supported by a range of professional operational staff. Currency management Returns for international assets can be affected by the ups and downs of the exchange rate as well as changes in investment values. To help protect options that include international assets from adverse currency movements, we set a target currency exposure for these options as part of setting our strategic asset allocations every year. Read more about how we manage currency and our foreign currency targets for the 2018/19 financial year at australiansuper.com/howweinvest Related party investments We only make contracts and investment transactions with related parties when we believe you ll get the same or more benefits from those investments. Related parties might be organisations that conduct business with us, where we or one of our representatives might be a shareholder, part owner or director of that organisation or have significant influence on it. To find out more, view our latest audited financial statements available at australiansuper.com To view AustralianSuper s investment holdings in each option, visit australiansuper.com/whatweinvestin 32

33 Environmental, social and governance management Our priority is to achieve superior long-term investment returns for you. We believe companies with good environmental, social and governance (ESG) management are more likely to increase their value and provide better long-term returns for our members. Active Owner Program Being an active owner means that we make decisions and undertake a range of actions that integrate ESG considerations into our investment process. These fall into three areas: Integration: consideration, integration and valuation of ESG issues when choosing and managing investments Stewardship: actively engaging with companies to influence and improve ESG practices Choice: considering our members values in our our investment choices. Engagement with companies we invest in We regularly talk with companies we invest in and the fund managers we use to invest for us. The aim is to ensure that the companies we invest in understand who we are and what is in our members investment interests. Share voting As part of making sure companies we invest in are well managed and focus on long-term value creation, we vote on matters relating to: S&P/ASX 200 companies any other Australian listed company that we re a large shareholder in major global companies all Australian companies held internally You can view our quarterly voting history and read more about our Active Owner Program at australiansuper.com/investmentgovernance Working with others AustralianSuper is a signatory to the United Nation s Principles of Responsible Investment (UNPRI). We work collaboratively to address ESG issues with other industry participants including The Australian Council of Superannuation Investors (ACSI), the Investor Group on Climate Change and directly with other big investors. AustralianSuper has decided to exclude companies that manufacture tobacco products from its investment options by the end of Tobacco is a unique investment, due to its particular characteristics and the damage it causes. There is no safe level of consumption; it s highly addictive and it s the largest preventable cause of death in the world. These factors make investing in tobacco inconsistent with our purpose of helping members achieve their best possible retirement outcomes. We will prudently divest tobacco holdings and reinvest them elsewhere with the continued aim of achieving the best possible investment outcomes for members. This exclusion doesn t apply to the use of derivatives that have an indirect exposure to tobacco, or ETFs in Member Direct. More choice For members who want to invest in in a way that reflects their environmental and social values, we offer Socially Aware and Member Direct. About Socially Aware Socially Aware invests using strict screening based on environmental, social and governance standards. It doesn t invest in shares or fixed interest of Australian or international companies that: own fossil fuel reserves* produce tobacco, munitions or mines have single gender boards have human rights issues. We will aim to apply these exclusions to other asset classes where possible. Socially Aware removes investment in companies that own fossil fuel or uranium reserves regardless of the size of their ownership. We believe this is the simplest, most transparent way of removing these investments at their source while enabling the option to meet its investment return objectives. It can still invest in companies that invest in, provide services to, or buy, process or sell products from the excluded companies. These might include companies that have shareholdings in or banks who lend money to a company, plus service providers like security, catering or office suppliers or petrol refiners and distributors. This investment option may use Exchange Traded Index Futures (up to 5% of the total assets) to efficiently manage cash flows and ensure this option is invested within the targeted asset allocation. This may include economic exposure to companies that are normally excluded by the option s investment screens. You can find out more about the asset allocation and risk profile of our Socially Aware option on page 18. About Member Direct If you invest with Member Direct, you can tailor your selection of individual companies in the S&P/ASX 300, ETFs and term deposits to suit your investment needs. See page 24 for more about Member Direct. * Reserves, in this context, are coal, oil, gas or uranium that can be extracted from known fields at an economical cost. 33

34 Making your investment choice Whether you ve already made up your mind about what investment options will suit you or you re still deciding, we can help you take the next steps, including: how to choose your investment options how to change your options where to get help and advice. 34